1. Calculate the required nominal rate of monthly return for the portfolio by using the discounted cash flow (or time value money) Model. Illustrate the investment constraints (such as the investment horizon, liquidity need, tax concern) in this case. Describe return and risk objectives, including the monthly volatility of the portfolio not exceeding 4% and required pretax nominal rate of monthly return. Demonstrate the process of your asset allocation and justify why you think this asset allocation would meet the investment objectives and constraints.
2. Calculate the Sharpe ratios of both the short-selling and non-short selling tangency portfolio's, and the ASX200 market portfolio. Report your results in a table. Plot the three Capital Allocation Lines (CAL's) from the bond through the two tangency portfolios and the market portfolio on a graph of return versus standard deviation.
Answer:
Gathering candidate ideas for investment from various sources (internal and external)
Considering candidate and approved projects based upon an analytic decision making framework
Choosing highly ranked projects that together meet constraints for budget and resources.
Reporting on changes, progress, and results in the portfolio
Reconsidering the portfolio on an ongoing basis Practicing continuous improvement of Portfolio Management processes.
Improving portfolio performance is largely based upon effective project delivery and the ability to make changes
You cannot assume that approved projects will achieve the initially expected results. Their value, risk, and cost must be periodically re-evaluated. If projects are underperforming or have better alternatives, they should be cancelled or replaced.
Effective Portfolio Management depends on other processes
Timely and accurate information from Project Management, Resource Management, and Portfolio Management processes are required to make effective Portfolio decisions
References
Xinyi, L., & Hua, F. (2016). Stock-bond correlation and duration risk allocation. Journal of Portfolio Management, 42(2), 56-63.
? Chow, T.-M.M. et al., 2014. A study of low-volatility portfolio construction methods. Journal of Portfolio Management, 23(6), pp.89–788
? Walker, S., 2014. Understanding Alternative Investments. 1st ed. New York: Palgrave Macmillen., 47(4), pp.89–6436.
Guerard Jr, J.B. ed., 2009.Handbook of portfolio construction: Contemporary applicatons of Markowitz techniques. Springer Science & Business Media. [Online] Accessed 10 May, 45, pp.89–370.
Krokhmal, P., Zabarankin, M. and Uryasev, S., 2011. Modeling and optimization of risk.Surveys in operations research and management science,16(2), pp.49-66. MacKenzie, D., 2008.An engine, not a camera: How financial models shape markets. MitPress. [Online]. Accessed : May 11, 40(4), pp.89–267
